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Auto Sales Digging Out of a Deep Hole

Full recovery for the carmaking industry is still far down the road.By Jim OstroffJune 17, 2010

Although the worst sales slump in decades is over for the U.S. automobile industry, it will be years before annual sales can hope to match the 16 million or so vehicles sold in 2007 -- before the market swooned -- let alone the record 17.3 million set nearly a decade ago.

Still-shaky consumer confidence and tight credit will hold sales to around 12 million new cars, sport-utility vehicles and pickup trucks this year. But that’s about 15% better than in 2009, when dealers sold just 10.4 million vehicles -- and that with a strong assist from Uncle Sam’s cash-for-clunkers program. The $2.9 billion doled out in rebates probably boosted sales by about 750,000 vehicles.

Next year, assuming the economy continues its slow recovery, look for sales to hit about 13.5 million and reach 16.5 million around mid-decade. As pent-up demand is unleashed and consumer confidence increases, based on a recovering job market, auto sales will have a shot at exceeding the 2001 record by 2016 or thereabouts.

But note that the record sales in 2001, and sales nearly as high in subsequent years, are in the books with an asterisk. They were artificially pumped up by progressively higher cash rebates, which often approached $5,000 per vehicle for the Detroit automakers’ products, plus zero percent financing.

Chrysler, Ford and General Motors had to offer eye-popping incentives. Each had a large number of older assembly plants that needed to operate at high capacity to be profitable and were bound by labor agreements that made it nearly impossible to shutter plants. When ballooning health care and pension costs were added in, the Detroit automakers’ costs of manufacturing a vehicle were thousands of dollars above their import brand competitors, and the domestics sank into a sea of red ink.

It’s a different ball game now. The three automakers can be profitable with total U.S. sales of around 10 million vehicles, instead of 16 million. GM’s and Chrysler’s bankruptcy reorganizations, and Ford’s voluntary one, have squeezed out billions of dollars of annual operating costs, as the companies downsized assembly plants, labor forces and wages.

Without strong incentives juicing auto sales, their growth will be pegged mainly to demographic and economic trends. “Given the outlook for employment and the economy, about 5% of the driving age population likely will buy a new vehicle this year, following 4.4% who did in 2009, the lowest number in 50 years,” says Rebecca Lindland, automotive group director at IHS Global Insight, an economic consultancy.

The car buying population will expand just a tad more in 2011, Lindland says, since the industry’s earlier blowout sales and easy credit saw “about 1 million people buy new vehicles who normally would not.”

Generation Y Giving Cars a Pass

The generation gap is a growing, long-term headache for automakers.

By Jim OstroffSeptember 14, 2010

Selling cars to young adults under 30 is proving to be a real challenge for automakers. Unlike their elders, Generation Yers own fewer cars and don’t drive much. They’re likely to see autos as a source of pollution, not as a sex or status symbol.

Motorists aged 21 to 30 now account for 14% of miles driven, down from 21% in 1995.

They’re more apt to ride mass transit to work and use car sharing services -- pioneered by Zipcar -- for longer trips. And car sharing choices are expanding, with car rental firms moving into the market, making it convenient for young folks to rent with hourly rates and easy insurance. Connect by Hertz, for example, is rolling out its car sharing services in the New York metropolitan area, with plans to eventually expand them to around 40 college campuses nationwide.

The trend won’t cause car sales to tank, of course, but the generational shift doesn’t bode well for manufacturers and auto dealers, which for decades have counted on wooing young new drivers to their brands in hopes of cementing lifetime customer relationships.

Gen Yers are a big potential market: At 80 million strong, they represent the biggest generation in U.S. history. Baby boomers are a close second, but millions of them begin turning 65 next year -- an age at which car purchases drop off sharply.

“It’s a matter of mind-set far more than affordability,” says William Draves, president of Learning Resources Network, an association that studies consumer trends and provides education and training services.

“This generation focuses its buying on computers, BlackBerrys, music and software and views commuting a few hours by car a huge productivity waste when they can work using PDAs while taking the bus and train,” says Draves.

Moreover, in survey after survey, Gen Yers say that they believe cars are damaging to the environment. Even hybrid electric vehicles don’t seem to be changing young consumers’ attitudes much.

Details and Disclosures

The gas card will be a Visa® gift card that can be used for merchandise purchases in addition to gas purchases. Visa® is in no way affiliated with this giveaway. In order to qualify for the gas card, a loan application must be submitted from 2/8/2015 through 2/16/2015 and PenFed must disburse your application between 2/8/2015 through 2/28/2015. Offer is not valid for refinanced auto loans with PenFed and vehicle loans taken out against a lien free vehicle. Please allow 4 weeks for delivery of your gift card. Each qualified disbursed loan will receive a $100 Visa® Gift card. Disbursed loans must be active for a minimum of 30 days to qualify for the promotion. Loans that are cancelled in the first 30 days will NOT qualify for the promotion. All gift cards will be mailed to the address of record no later than March 15, 2015.

*Annual Percentage Rate. Your actual APR will be determined at the time of disbursement and will be based on your application and credit information. Rates quoted assume excellent borrower credit history. Not all applicants will qualify for the lowest rate.

New Auto Loans: Loan rate applicable to new vehicles only. New vehicles are where you are the original owner and the vehicle is a current (2015) or prior model year (2014). Up to 100% financing is available. Weight restrictions apply. Minimum loan amount $20,000 for 61-72 month term. In order to refinance an existing PenFed auto loan, the current rate must be equal to or greater than the rate on your existing PenFed auto loan. Rate depends on term. Other restrictions including vehicle and mileage limitations may apply. “Smart” Car Collateral Restrictions: Total financing is limited to 100% of the value. Financing is not available with a Payment Saver Loan for “Smart” cars, Trucks (including hybrids), and SUVs (including hybrids).

Rates as low as 1.49% APR apply to new vehicle loan amounts up to $100,000 financed for 12-36 months. Rates as low as 2.24% APR apply to new vehicle loan amounts up to $100,000 financed 37-48 months. Rates as low as 2.24% APR applies to new vehicle loan amounts up to $100,000 financed for 49-60 months. Rates as low as 2.74% APR apply to new vehicle loan amounts finance for 61-72 months.

Used Auto Loans: Maximum used car loan advance will be determined by PenFed using a NADA value. Up to 100% financing is available to qualified members. In order to refinance an existing PenFed auto loan, the current rate must be equal to or greater than the rate on your existing PenFed auto loan. Call 800-247-5626 for details.

Rates as low as 1.99% APR apply to used vehicle loan amounts up to $100,000 financed for 12-36 months. Rates as low as 2.99% APR apply to used vehicle loan amounts up to $100,000 financed for 37-48 months. Rates as low as 2.99% APR apply to used vehicle loan amounts up to $100,000 financed for 49-60 months. Rates as low as 3.49% APR apply to used vehicle loan amounts finance for 61-72 months. Financing for 61-72 months would be limited to the current (2015) and prior two model years (2014 & 2013). Rate depends on term. Other restrictions including vehicle and mileage limitations may apply.

Refinance Auto Loans: New vehicles are where you are the original owner and the vehicle is a current (2015) and prior model year (2014). For used vehicles, maximum used car loan advance will be determined by PenFed using a NADA value. Up to 100% financing is available to qualified members. In order to refinance an existing PenFed auto loan, the current rate must be equal to or greater than the rate on your existing PenFed auto loan.

“Smart” Car Collateral Restrictions: Total financing is limited to 100% of the value and loan terms cannot exceed 60 months. Financing is not available with a Payment Saver Loan for “Smart” cars, Trucks (including hybrids), and SUVs (including hybrids).

Rates as low as 1.49% APR apply to new vehicle loan amounts up to $100,000 financed for 12-36 months. Rates as low as 2.24% APR apply to new vehicle loan amounts up to $100,000 financed for 37-48 months. Rates as low as 2.24% APR apply to new vehicle loan amounts up to $100,000 financed for 49-60 months. Rate depends on term. Other restrictions including vehicle and mileage limitations may apply.

Payment Saver Auto Loans:

How It Works

With Payment Saver Auto Loans, you will be able to make a lower payment than what the conventional auto loan would offer, yet at a higher interest rate. Then, at the end of the loan, you will owe the remaining balance of the loan itself. At this juncture, you may choose to pay off the loan or sell, trade, or refinance the vehicle.

Your Payment Saver Auto Loan payment is calculated based on the loan term, the amount you have requested, and the residual value of the vehicle. The residual is the expected value of your vehicle at the end of your loan term.

The difference between your loan amount requested and the residual value is amortized over the loan term, resulting in a low monthly payment without the danger of your becoming upside-down in the loan.

**Not a guarantee to refinance. Refinancing subject to Pentagon Federal current creditworthiness standards.

The residual value of the vehicle after the loan term is an estimation. We cannot guarantee this value. The residual value is subject to current used car market conditions and depends on a number of factors including, but not limited to, the mileage the car has been driven and the condition of the car at the end of the loan term.

Trucks, Vans, Crossover Vehicles, Smart cars and SUVs are not eligible as Payment Saver Loan vehicle types. This restriction includes hybrid trucks and SUVs as well.

Pre-approved drafts no longer available for Payment Saver loans.

NEW VEHICLES: Never titled; Current (2015) and prior model year (2014).

USED VEHICLES: Current (2015) and prior two model years (2014 & 2013).

The vehicle mileage may not exceed 15,000 miles per year based on the model year.

Used car loan value based on NADA Retail Value. Other restrictions may apply. Call 800-247-5626 for details.

Loan Payment Example: A $27,000 new auto financed at 2.49% APR; 60 monthly payments of approximately $379.00 each, with a final balloon payment of approximately $6,729.00.

This credit union is federally insured by the National Credit Union Administration. Rates are current as of March 2015 unless otherwise noted and are subject to change. APY = Annual Percentage Yield APR = Annual Percentage Rate

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